XYZ Company - Balance Sheet As of 12/31/2014 Assets Current Assets Cash $ 50,000
ID: 2416853 • Letter: X
Question
XYZ Company - Balance Sheet As of 12/31/2014
Assets
Current Assets
Cash
$ 50,000
Accounts Receivable
$ 35,000
Total Current Assets
$85,000
Long-term Investments
Investments in Hokie Co. - AFS
$25,000
Property Plant and Equipment
Printing Equipment
$100,000
less Accumulated Depreciation
$ (40,000)
$60,000
Building
$ 110,000
less Accumulated Depreciation
$ (3,667)
$106,333
Intangible Assets
Trademark
$10,000
Total Assets
$ 286,333
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable
$115,000
Unearned Revenue
$45,000
Total Current Liabilities
$160,000
Total Liabilities
$ 160,000
Stockholder's Equity
Capital Stock:
Common Stock ($1 par value 10,000 shares issued)
$10,000
Additional Paid in Capital
$50,000
Total Paid in Capital
$ 60,000
Retained Earnings
$ 66,333
Total Stockholder's Equity
$126,333
Total Liabilities and Stockholder's Equity
$286,333
The Following Events Happened in 2015
1. On Jan. 1 XYZ Co. issued 1000 shares of 6% $10 par preferred stock for $20,000.
2. XYZ Co. had $150,000 in sales ($100,000 cash and $50,000 on account).
3. On Jan. 1 XYZ. paid $20,000 to rent a building for the next 12 months
4. XYZ purchased supplies for $10,000 on account
5. XYZ Co. collected $35,000 in cash for settlement of outstanding accounts receivable
6. XYZ Co. provided services to earn all unearned revenue in 2015.
7. At the end of the year only $2000 of supplies remained
8. On 12-31 XYZ Company declared and paid preferred dividends
Other Information:
The Building has a useful life of 10 years and a salvage value of 10,000. The company uses straight line depreciation.
The Printing Equipment has a useful life of 10 years and a salvage value of 50,000. The company uses straight line depreciation.
XYZ Co's Income Tax Rate is 30 percent and taxes will not be paid until 2016.
1:What would XYZ Company report for revenue on the 2015 Income Statement?
2:What would XYZ Company report for total operating expenses on the 2015 Income Statement?
3:What would XYZ Company report for Net Income on the 2015 Income Statement?
4: What would XYZ Company report for total current assets on the 2015 Balance Sheet?
5: What would XYZ Company report for total liabilities on the 2015 Balance Sheet?
6: What would XYZ Company report for additional paid in capital for preferred stock on the 2015 Balance Sheet?
7: What would XYZ Company report for total stockholders' equity on the 2015 Balance Sheet?
8: After closing entries, how does Event #2 affect stockholders' equity?
Event #2: XYZ Co. had $150,000 in sales ($100,000 cash and $50,000 on account).
9: After closing, how does Event #6 affect the Balance Sheet?
Event #6: Blazer Co. provided services to earn all unearned revenue in 2015.
10: After closing entries, how does Event #7 affect the Balance Sheet?
Event #7: At the end of the year only $2000 of supplies remained
XYZ Company - Balance Sheet As of 12/31/2014
Assets
Current Assets
Cash
$ 50,000
Accounts Receivable
$ 35,000
Total Current Assets
$85,000
Long-term Investments
Investments in Hokie Co. - AFS
$25,000
Property Plant and Equipment
Printing Equipment
$100,000
less Accumulated Depreciation
$ (40,000)
$60,000
Building
$ 110,000
less Accumulated Depreciation
$ (3,667)
$106,333
Intangible Assets
Trademark
$10,000
Total Assets
$ 286,333
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable
$115,000
Unearned Revenue
$45,000
Total Current Liabilities
$160,000
Total Liabilities
$ 160,000
Stockholder's Equity
Capital Stock:
Common Stock ($1 par value 10,000 shares issued)
$10,000
Additional Paid in Capital
$50,000
Total Paid in Capital
$ 60,000
Retained Earnings
$ 66,333
Total Stockholder's Equity
$126,333
Total Liabilities and Stockholder's Equity
$286,333
Explanation / Answer
1. The company will report $( 150,000+ 45,000) = $ 195,000 as revenue on the 2015 Income Statement.
2. Total operating expenses would be (rent + supplies expense + depreciation expense) = ( 20,000 + 8,000 + !5,000) =$ 43,000
3. Net income = (Revenue - total operating expenses) - income tax expense = (195,000 - 43,000 ) 0.70 = $ 106,400
4. Total current assets = ( cash + accounts receivable + supplies) = (184,400 + 50,000 + 2,000) = $ 236,400
5. Total liabilities = Accounts payable + Income tax payable = $(125,000 + 45,600) = $170,600
6 Additional paid-in capital for preferred stock : $ 10,000
7. Total stockholders' equity :$ 252,133 ( Beginning 126,333+ Issue of preferred stock $ 20,000 + Net income $ 106,400 - dividends on preferred stock $ 600)
8. Event#2 increases stockholders' equity by $ 150,000
9. Event # 6 also increases stockholders' equity by $ 45,000
10. Event # 7 increases current assets (supplies) in the balance sheet by $ 2,000.
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